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ETF Securities reports highest outflows in industrial metals

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ETF Securities reports that last week saw USD99.9mn in outflows from industrial metals ETPs.

The firm writes that arguably the most cyclically exposed of the commodities – industrial metals – experienced the highest outflows in 10 weeks.

An equity market sell-off dragged other cyclical assets lower. Most of the outflows were concentrated in broad baskets (-USD133.6 million) and copper (-USD26.3 million). However, there were inflows into nickel (USD61.3 million) and silver (US19.3 million), highlighting that some investors are tactically searching for opportunities after the price decline, ETF Securities writes.

Inflows into European equity long ETFs rose to highest level since 2016, while outflows from short ETFs rose to highest since 2016. Investors bought USD15.9 million of European equity ETPs as European bourses saw a capitulation in prices.

Meanwhile investors locked in their profits, selling USD9.9 million of European (mainly UK) short ETF positions. The trading patterns indicate that many ETP investors see the current equity market declines as transitory, the firm writes.

Gold, often the first port of call in times of stress, did not enjoy that position last week. Gold saw USD57.3 million of outflows as its price declined 1.3 per cent.

As US Treasury yields spiked to 2.86 per cent at the end of the week from 2.71 per cent at the beginning of the week and US dollar appreciated, gold prices fell.

A second US government shutdown in the space of three weeks on Friday only offered temporary support to gold as a spending bill was signed and government re-opened in a matter of hours.

Oil ETPs saw a further USD29.7 million of outflows as US pumps out a record 10.25mn barrels per day. In the past 32 weeks there has only been one week of inflows into oil ETPs. In contrast to oil futures, which had recently seen speculative positioning rise to an all-time high, ETP investors had been selling into the price rally that started in June 2017 and ended in January 2018, ETF Securities writes.

With many ETP investors having accumulated positions during the prices declines from 2014, recent selling indicates profit taking. “We had argued in that prices around USD70/bbl hit in January were not sustainable as US production would rise in response and suppress prices again. Oil rig counts in the US have risen for the past three weeks, oil production has risen for four consecutive weeks and crude inventory is rising once again. In fact US oil production rose to over 10.25 million barrel per day last week (the highest since weekly records began in 1983 and higher than the monthly data that began in 1920).

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